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Leverage Indicators Suggests That Bitcoin Traders Should Be Cautious Despite Spot ETF Optimism


Bitcoin (BTC) and other related investment vehicles went higher after BlackRock (BLK)  filed for a spot bitcoin exchange-traded fund (ETF) last month.

This brought renewed optimism in the crypto market.

At the moment, perpetual futures market traders aren’t willing to take on high leverage.

According to data tracked in the past four weeks (by Glassnode and Blockware Solutions), the ratio of open interest in BTC perpetual futures to Bitcoin’s market cap is locked in a narrow range of 1.5% to 1.7%, which is well below the high of 2.6% seen in September 2022.

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Analytical Suggestions On Bitcoin Spot ETF

Analysts at Blockware Solutions in a newsletter on Friday said that the risk appetite of future traders hasn’t changed, despite BTC still holding the $30,000 mark since the past month.

Analyzers also stated that the market cap ratio remains relatively low, which means as supply continues to contract into the hands of the long-term holders, the spot will possibly keep pushing the price higher in the short term to medium term.

Tracking The Use of Leverage in the Market

Traders make use of leverage to open positions that are worth more than the coins deposited as a margin at an exchange.

Using leverage traders are exposed to liquidations although it magnifies both profits and losses.

Leverage forces the unwinding of bearish shorts or bullish longs due to the shortage of margin.

The higher the possibility that liquidations inject volatility into the market, the more the degree of leverage.

Leverage can also be tracked in the market by dividing the open interest by the value of BTC held in wallets linked to derivative exchange wallets.

According to South Korea-based CryptoQuant, the estimated leverage has remained stagnant to a large extent since June 20 meaning a safe play by the average trader.

SEC’s Approval of Blackrock’s ETF Can Change The Bitcoin Game After Years Of Rejection

After several rejections of the bitcoin ETF in the previous years despite strong demand in 2018, in June this year, the well-known global fund and management firm Blackrock formally applied for SEC approval for its own bitcoin ETF, to be handled through iShares Bitcoin Trust.

SEC rejected the first filing as it had been doing for years. Blackrock refiled the application putting all SEC’s observations into consideration a month later.

In an interview with Advisor at VanEck and Tether, Gabor Gurbacs says there is no reason good enough for which Bitcoin ETF should not be approved.

According to Gurbacs, the SEC’s concerns were about potential manipulation of the market, issues with custody, and overall underlying market maturity.

Approving a local spot ETF in the U.S. will have an impact on the price of bitcoin and also how traditional investors perceive assets while providing a heavily regulated investment product that has all of the SEC’s concerns addressed in it.

Gurbacs also added that the bitcoin ETF would increase institutional adoption which would contribute to greater market stability and less price volatility in turn.

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